Wednesday April 24, 2013 - 03:51:02 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 24-Apr-2013 -0348 GMT
Dow Jones (14719.46, +152.29, +1.05% ): Contrary to our view yesterday, the Dow Jones came up with a smart rally and closed 152 points higher but might still trade in a band 14500-14900 for a while, within the overall long-term uptrend.
Dax ((7,658.21, +180.10, +2.41%): German Dax has surprised with a staggering 180 point, breaking the fall in April. The retracement to 7700 has happened and now the index is at a critical make or break level. A Close above 7700 will be bullish. Support stands in at 7300.
Nikkei (13,705.00, +175.38, +1.30%) Backed by strong global cues the Nikkei has opened higher by 130 points and in the process has surpassed the key supply area of 13600. The index is in bull territory and looks likely to hit 15,000 in the medium term. However some retracement in the short term cannot be ruled out. Support for the Nikkei comes in at 13500.
Nifty (5836.90, +2.5 pts) managed to close marginally higher yesterday. The market is closed on account of Mahavir Jayanti today.
Gold (1421) is likely to see weakness. Resistance is seen near 1455. Gold looks particularly weak on the MCX, with potential to fall towards 23500. Silver (22.994) is trading weak, looks weak overall for a further decline towards 22.
Brent (100.4) has closed above 100. Looks likely to trade between the bread band of 97-103.
Copper (3.1095) looks quite weak however on the short term a bounce to 3.15 cannot be ruled out. In the medium test of the Oct-2011 low near 2.994 is quiet likely
Important development: The Dollar Index (83.02) has broken above 82.70 and seems to be pushing higher. Watch crucial Resistance at 83.81. That needs to hold in order to prevent further strength.
The Euro (1.2993) trades softer but has crucial Support at 1.2970. Today's German IFO data (which has been might determine whether the Euro climbs back into the 1.30-32 range or breaks below 1.2970 to target 1.2900. Dollar-Yen (99.35) managed to bounce from 98.48 yesterday. That seems to be a good Support now and an attempt to break above 100 could still be seen. Or, it could be that the market might consolidate between 98.00-100 till the BOJ Meeting on Friday. The Euro-Yen Cross (129.07) looks likely to consolidate between 130.50-127.50 this week. There is important Resistance near 131.80-132.00 on the Monthly chart, which might not break easily.
The Pound (1.5235) has dipped since yesterday, but has good trendline Support near 1.5200 which might be worth buying into today, for a rise towards 1.54. The UK GDP data due tomorrow (expectation +0.10%) could be a positive catalyst if the number is better than expected.
The Aussie (1.0233) is close to testing the very crucial Support at 1.0215. We could see a bit of a bounce given that the Aussie has already fallen 3.35% from 1.0582 since 11-Apr.
The Singapore Dollar (1.2412) trades relatively weak. The Brazilian Real (2.0185) has weakened over the last few days. However, the 200-day MA at 2.0248 could provide some Resistance to the USDBRL. The Rupee market is closed today on account of Mahavir Jayanti.
The Italian 10-Yr (3.94%) has fallen below 4.00% but has crucial Support near current levels. The Spanish 10-Yr (4.28%) has decline further and the Spain-Germany 10-Yr Spread (3.02%) is now at its lowest since Dec-11. Support is seen coming up near 2.80%.
While it is strange that the Euro is not being able to benefit from lower yields in Italy and Spain, perhaps it is the presence of Supports mentioned above which is making the markets cautious.
The market awaits the BOJ Meeting on Friday to see what inflation expectation the BOJ has after having pronounced at 2% inflation target. The JGB yields have been quite volatile recently, especially at the longer end of the Curve. The Curve as a whole has flatted a decent bit in the last few weeks, with the 5-Yr (0.23%) moving up and the 30-Yr (1.59%) coming down. Japanese LIBOR (6-mnth 0.2486%) has been coming down steadily for the last few months.
India is waiting keenly for a rate reduction at the next RBI Meeting on 03-May. The 10-Yr (7.75%) has come down from 8% in April and has potential to fall further towards 7.60% after a brief consolidation.
1:30 GMT or 7:00 IST AU CPI
...Expected 0.70 % ...Previous 0.20%
8:00 GMT or 13:30 IST GER IFO Business Climate
...Expected 106.40 ...Previous 106.70
8:00 GMT or 13:30 IST GER IFO Business Situations
...Expected 109.40 ...Previous 109.90
8:00 GMT or 13:30 IST GER IFO Business Expectations
...Expected 103.20 ...Previous 103.60
12:30 GMT or 18:00 IST US Durable Goods Orders
...Expected -2.80 % ...Previous 5.60 %
US New Home Sales
...Actual 417 K ...Previous 411 K
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